An anonymous director reports
RECIPE UNLIMITED ANNOUNCES IMPLEMENTATION AND TERMS OF $125 MILLION SUBSTANTIAL ISSUER BID
Recipe Unlimited Corp.'s board of directors has authorized a substantial issuer bid to purchase for cancellation a number of subordinate voting shares of the company for an aggregate purchase price not exceeding $125-million. The offer will expire at 5 p.m. Toronto time on Sept. 20, 2019, unless extended, varied or withdrawn by Recipe. The offer will be financed by drawing on existing credit facilities.
Details of the offer, including instructions for tendering shares, are included in the formal offer to purchase and issuer bid circular, letter of transmittal, notice of guaranteed delivery, and other related documents. The offer documents are expected to be mailed to shareholders, filed with applicable Canadian securities regulatory authorities and made available without charge on SEDAR, as well as being posted on the company's website promptly. Shareholders should carefully read the offer documents prior to making a decision with respect to the offer.
Shareholders who wish to participate in the offer will be able to do so through (i) auction tenders, which will allow shareholders who choose to participate in the offer to individually select the price, within a range of not less than $24.50 and not more than $27 per share (in increments of 10 cents per share), at which they are willing to sell their shares, or (ii) purchase price tenders in which they will agree to have a specified number of shares purchased at a purchase price to be determined pursuant to the auction and have their shares considered as having been tendered at the minimum price of $24.50 per share for the purposes of determining the purchase price. Shareholders who validly deposit shares or multiple voting shares of the company without specifying the method in which they are tendering such shares will be deemed to have made a purchase price tender. Upon expiry of the offer, Recipe will determine the lowest purchase price (which will not be less than $24.50 per share and not more than $27 per share) that will allow it to purchase the maximum number of shares properly tendered to the offer and, not properly withdrawn, having an aggregate purchase price not exceeding $125-million. All shares purchased by the company pursuant to the offer (including shares or multiple voting shares tendered at prices below the purchase price) will be purchased at the same purchase price.
Holders of multiple voting shares will be entitled to participate in the offer. Multiple voting shares taken up by Recipe will be converted into shares on a one-for-one basis immediately prior to take up. Only those multiple voting shares proposed to be taken up by the company will be converted into shares on a one-for-one basis immediately prior to take-up.
Recipe believes that the purchase of shares is in the best interest of the company and its shareholders, and permits Recipe to return up to $125-million of capital to shareholders who elect to tender their shares. After giving effect to the offer, Recipe will continue to have sufficient financial resources and working capital to conduct its continuing business and operations, and the offer is not expected to preclude Recipe from pursuing its foreseeable business opportunities or the future growth of Recipe's business.
As of Aug. 8, 2019, Recipe had 26,309,673 shares and 34,396,284 multiple voting shares issued and outstanding. If the purchase price is determined to be $24.50 per share (which is the minimum price per share under the offer), the maximum number of shares that may be purchased by the company is 5,102,040 shares or approximately 8.4 per cent of the total number of shares issued and outstanding. If the purchase price is determined to be $27 per share (which is the maximum price per share under the offer), the maximum number of shares that may be purchased by the company is 4,629,629 shares or approximately 7.6 per cent of the total number of shares issued and outstanding.
Fairfax Financial Holdings Ltd. and its affiliates beneficially own and control 7,224,180 shares and 19,903,378 multiple voting shares, representing approximately 57 per cent of the total votes attached to all classes of the company's voting shares, and approximately 27.5 per cent of the shares and approximately 57.9 per cent of the multiple voting shares. The Phelan family, through Cara Holdings Ltd. and its affiliates, owns 14,492,906 multiple voting shares, representing approximately 40.9 per cent of the total votes attached to all classes of the company's voting shares and approximately 42.1 per cent of the multiple voting shares.
Recipe has been advised that Fairfax will participate in the offer but will not be lowering its equity position in the company as Fairfax will be acquiring the same number of multiple voting shares from Cara Holdings, thereby increasing its voting position and increasing its proportionate equity interest in the company. Specifically, Fairfax intends to participate in the offer by tendering 1.55 million shares and, following completion of the offer, purchase from Cara Holdings at the purchase price such number of multiple voting shares equal to the number of shares tendered by Fairfax and taken up by the company in the offer. Completion of Fairfax's acquisition of multiple voting shares from Cara Holdings is conditional upon the completion of the offer and will be effected at the purchase price under the offer. Cara Holdings has also advised the company that it intends to tender 375,000 multiple voting shares to the offer.
No director or officer of the company has advised the company that he or she intends to deposit shares under the offer. However, they may decide to deposit shares to the offer in the event that the circumstances or decisions of any such persons change and, subject to applicable securities laws, such persons may sell their shares through the facilities of the Toronto Stock Exchange or otherwise during the period prior to the expiry date.
The offer is not conditional upon any minimum number of shares being properly deposited under the offer. The offer is, however, subject to other conditions and Recipe reserves the right, subject to applicable laws, to withdraw, extend or vary the offer if, at any time prior to the payment of any shares, certain events occur.
The closing price of the shares on the TSX on Aug. 13, 2019, was $25.05. During the six months ended Aug. 13, 2019, the closing prices of the shares on the TSX have ranged from a low of $25.05 to a high of $28.67 per share.
Recipe was authorized by the TSX to purchase up to 1,822,329 shares pursuant to a normal course issuer bid that commenced on June 24, 2019, and expires on June 23, 2020. Recipe has purchased 637,212 shares through this NCIB as at Aug. 13, 2019. There will be no further purchases of shares under this NCIB until after the expiry date or date of termination of the offer.
Recipe has engaged Scotiabank to act as exclusive financial adviser for the offer. Recipe has also engaged Computershare Investor Services to act as depositary for the offer. Any questions or requests for information regarding the offer may also be directed to the depositary.
Fairfax early warning disclosure
If all 1.55 million shares to be tendered by Fairfax to the offer are taken up and purchased by the company, representing 5.9 per cent of the outstanding shares as of the date hereof, and a corresponding number of multiple voting shares are acquired by Fairfax, which would represent 4.5 per cent of the outstanding multiple voting shares, Fairfax will beneficially own and control 21,453,378 multiple voting shares, representing approximately 62.4 per cent of the total outstanding multiple voting shares, and 5,674,180 shares, representing approximately 21.6 per cent of the total outstanding shares (before giving effect to the cancellation of any shares or multiple voting shares pursuant to the offer).
Fairfax will acquire the multiple voting shares from Cara Holdings pursuant to the private agreement exemption under Section 4.2(1) of National Instrument 62-104 -- Take-over Bids and Issuer Bids. Pursuant to the exemption, the purchase price to be paid for the multiple voting shares to be acquired following the offer will be equal to the purchase price, which will not be greater than $27, being less than 115 per cent of the market price of the shares (calculated in accordance with Section 1.11 of NI 62-104) as of the date of the agreement between Fairfax and Cara Holdings. Fairfax is acquiring the multiple voting shares for investment purposes. Fairfax continually reviews its investment alternatives and may purchase or sell securities of Recipe from time to time in accordance with applicable laws. In the future, Fairfax may discuss with management and/or the board of directors of Recipe any of the transactions listed in clauses (a) to (k) of item 5 of Form F1 of National Instrument 62-103 -- The Early Warning System and Related Take-over Bid and Insider Reporting Issues, and it may further purchase, hold, vote, trade, dispose or otherwise deal in the securities of Recipe, in such manner as it deems advisable to benefit from changes in market prices of Recipe securities, publicly disclosed changes in the operations of Recipe, its business strategy or prospects or from a material transaction of Recipe. An early warning report will be filed by Fairfax in accordance with applicable securities laws and will be available on SEDAR or may be obtained directly from Fairfax upon request at 416-367-4941 (attention: John Varnell) or at Fairfax Financial Holdings Ltd., 95 Wellington St. West, Suite 800, Toronto, Ont., M5J 2N7.
About Recipe Unlimited Corp.
Founded in 1883, Recipe is Canada's oldest and largest full-service restaurant company. The company franchises and/or operates some of the most recognized brands in the country including Swiss Chalet, Harvey's, St-Hubert, The Keg, Milestones, Montana's, Kelsey's, East Side Mario's, New York Fries, Prime Pubs, Bier Markt, Landing, Original Joe's, State & Main, Elephant & Castle, The Burger's Priest, The Pickle Barrel, Marigolds & Onions, and 1909 Taverne Moderne. Recipe's iconic brands have established the organization as a nationally recognized franchisor of choice. As at June 30, 2019, Recipe had 24 brands and 1,384 restaurants, 85 per cent of which are operated by franchisees and joint venture partners.
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